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Virtual coaching ClassesOrganised by BoS, ICAI

FOUNDATION LevelPaper 2a: BUSINESS LAWS

Faculty: CA. Harleen Kaur

Date: 18 March 2021

15 July, 2020 1

THE COMPANIES ACT, 2013

PART - I

18 march 2021 © The Institute of Chartered Accountants of India 2

Session Layout

UNPAID SELLER

RIGHTS OF AN UNPAID SELLER

RIGHTS AGAINST THE

RIGHT AGAINST THE

REMEDIES OF BUYER

AGAINST THE SELLER

FEATURESCORPORATE VEIL THEORY

CLASSES OF COMPANIES

SHARE CAPITAL & SHARES

MEMORANDUM & ARTICLES OF ASSOCIATION

Salient Features

1. BODY CORPORATE2. PERPETUAL SUCCESSION

Salient Features

3. SEPARATE LEGAL ENTITY

●Macaura Vs. Northern Assurance Co. Limited (1925)

Salient Features

4. ARTIFICIAL LEGAL PERSON●Can own property

●Sue and be sued

●Enter into contracts

●Act through human agency

Salient Features

5. COMMON SEAL6. LIMITED LIABILITY

CORPORATE VEIL THEORY

Salomon Vs. Salomon and Co. Ltd

A company has its own existenceand a shareholder cannot be heldliable for the acts of the company

Can the Veil of corporatepersonality be lifted ?

LIFTING OF CORPORATE VEILReasons Examples

1. To determine the character of the

company

Trading with enemy

2. To Protect Revenue Tax Evasion

3. To avoid a legal obligation Avoid labour laws

4. Formation of subsidiaries to act

as agents

Merchandise Transport Limited Vs.

British Transport Commission

5. Formed for fraud/ improper

conduct

Illegal activities

LIFTING OF CORPORATE VEIL

Daimler Co Ltd. Vs Continental Tyre & Rubber Co.(Alien enemy case law reference)

Dinshaw ManeckjeePetit(To protect revenueor evade taxes)

Gilford motor Co. VsHorne (Fraud/Misconduct)

CLASSES OF COMPANIES

ON THE BASIS OF INCORPORATION

●Registered Companies

●Statutory Companies

●Chartered Companies

ON THE BASIS OFLIABILITY

●Limited by Shares

●Limited by Guarantee

●Unlimited Companies

ONE PERSON COMPANY

To encourageentrepreneurship

Separate legal entity withlimited liability feature

PRIVATE AND PUBLIC COMPANY

●Public Company means :

●NOT a Private Company

●Min. Paid up Capital

●Subsidiary of a PublicCompany deemed to be aPublic Company

●Min 7 and Max. unlimited

No min. Paid up capital

●Min 2 and max 200 (excludingemployees)

●Right to transfer sharesrestricted

●Prohibition on invitation tosubscribe to securities of thecompany

HOLDING AND SUBSIDIARY COMPANY

●Controls the composition of BOD

●More that half of total Voting Power

●Subsidiaries's Subsidiary

ASSOCIATE COMPANY

●Significant Influence but not subsidiary

●Significant influence : at least 20% total voting power orcontrol of or participation in business decisions underagreement

●Includes Joint Venture

LISTED AND UNLISTED COMPANIES

●Securities listed on Stock Exchange

GOVERNMENT COMPANY●Not less than 51% ofPUC by

●Central Government

●Partly

●Includes subsidiary ofGovt. Company

●State Govt. (s)

FOREIGN COMPANY & SEC. 8 COMPANY

●Company registered outside India but having a place inIndia

●Promote Charitable objects of commerce, art, science,sports, education, research, social welfare, religion,charity, protection of environment (FICCI, National SportsClub of India, CII )

SMALL COMPANY

●Other than a public company

●PUC not exceed INR 50 Lakh – INR 10 Crore and

●TO does not exceed INR 2 Crore – 100 Crore

Should not be :

●Holding or Subsidiary Co

●Sec. 8 Company

●BC governed under any special Act

DORMANT COMPANY & NIDHI COMPANIES & PFI

●Where a company is formed for a future project or to holdassets or intellectual company and has no significanttransaction – dormant company status

● "Nidhi" or "Mutual Benefit Society" means a company whichthe Central Government may, by notification in the OfficialGazette, declare to be a Nidhi or Mutual Benefit Society, asthe case may be.

●LIC, IDFC ( Public Financial Institutions)

Thank You

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